Land prices are set to soar in the sleepy coastal village of Dugarajapatnam in Andhra Pradesh’s Nellore district after it was chosen by the Union cabinet as the location for one of two new government-controlled ports.

This will be the second Union government-controlled port in Andhra Pradesh after the one in Visakhapatnam.

The Union government currently controls 13 ports that handled a combined 545.67 million tonnes (mt) of cargo in the year to March. The 13 ports together account for some 52% of India’s external trade shipped by sea.

The new ports are to be developed as part of an effort to triple the country’s cargo-loading capacity to 3.13 billion tonnes by 2020.

The port in Dugarajapatnam would require about 4,000 acres, most of which is owned by the state government, said B. Sreedhar, collector of Nellore district.

Land acquisition would still be required.

“Because of the development of the new port, farmers and other private landowners may ask for higher compensation," said Sreedhar, an Indian Administrative Service officer.

Agriculture and aquaculture are the main occupations of the villagers.

“An acre of land costs about ₹ 6-8 lakh in Dugarajapatnam," said P.V. Sunil, tehsildar of Vakadu mandal (an administrative unit) under which the village falls. “Land prices will go up with the declaration of the new port at Dugarajapatnam."

Andhra Pradesh is India’s second biggest maritime state by cargo handled after Gujarat. Nellore district already has a big private port at Krishnapatnam run by Hyderabad-based CVR Group.

The Andhra Pradesh government had earlier recommended Ramayapatnam as the location for the new port after the Indian Space Research Organisation (ISRO) raised concerns on the development of a new port at Dugarajapatnam because of its proximity to the satellite launch centre at Sriharikota.

ISRO has since diluted its concerns and suggested some restrictions on port operations during satellite launches, the shipping ministry spokesman said, adding that the site had been preferred over Ramayapatnam because of the availability of adequate land to set up the port.

The cabinet directed the shipping ministry to conduct a techno-economic feasibility study for the port at Dugarajapatnam.

The cabinet also approved the shipping ministry’s proposal to set up a new port at Sagar Island in West Bengal, the second in the eastern state after Kolkata.

The two new major ports approved by the cabinet will cost about ₹ 20,500 crore to build and have 116 mt of annual cargo-handling capacity.

The two ports will be set up as companies under India’s Companies Act of 1956. Of the 12 Union government-controlled ports, 11 are run as trusts.

Ennore Port located in Tamil Nadu is the only exception in this regard. The Ennore Port was formed as a company under the Companies Act, 1956, when it was opened in 2001.

The state governments of Andhra Pradesh and West Bengal will have equity participation in the new ports.